NEWTON
PERSONAL ACCOUNT DEALING RULES
AND
CODE OF ETHICS
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Contents:
A Background
1. Why do these rules exist?
B General Application
2. Who do these rules apply to?
3. Access Persons
4. What transactions do these rules cover?
5. Derivatives
6. Investment Clubs
7. Spread Betting
C Dealing in Mellon Securities
8. Dealing Restrictions
9. Knowledge of Major Mellon Events
10. Mellon Closed Period
D Newton Policy & Your Obligations
11. Newton Policy
12. Your Obligations
E Establishing & Operating Your Personal Account
13. Dealing Methods
14. In House - Quasar Account
15. In House - Execution Only
16. In House - Discretionary Accounts
17. External Broker
F Obtaining Approval to Deal
18. Completing a PA Deal Slip
19. Obtaining Approval to Deal
G General Dealing Restrictions
20. 60-Day Trading Profit Prohibition
21. Black Out Period
22. De Minimis Exemption
H Disgorgement Policy
23. What is disgorgement and why do we have it?
24. How does it work?
I Private Placements and IPOs
25. Definitions
26. The Approval Process
J Investment Ethics Committee ("IEC")
27. Purpose of IEC
28. Operation of IEC
K Contemporaneous Disclosure
29. Purpose of the Requirement
30. How does it work?
31. De Minimis Exemption
L Holdings & Transaction Reports
32. The Requirement
33. What is Covered by this Requirement
34. Initial Holdings Report
35. Quarterly Transaction Report
36. Annual Holdings Report
M Monitoring Compliance with these Rules
37. Internal Monitoring
38. UK Regulators
39. US Regulators
40. Clients
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IMPORTANT NOTICE:
Failure to comply with these rules is a breach of your contract of employment
with Newton. A serious breach would be treated as Gross Misconduct in
accordance with the Newton Disciplinary Policy and could lead to
dismissal.
Furthermore, a breach of these rules may also be a breach of the IMRO rules
or US regulations. Registered Individuals are reminded that IMRO has unlimited
powers to discipline individuals for breaches of their rules.
Also, US regulators (e.g. the SEC and the
Federal Reserve Bank) have powers to
sanction firms and individuals who
violate their regulations.
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A. Background
1. Why do these rules exist?
1.1. Newton, together with all investment management companies in the UK,
has an obligation to ensure that its staff comply with the financial
services industry code of conduct in respect of dealing in investments
on their personal account. In the UK this code is embodied in the IMRO
rules and is strictly enforced by Newton.
1.2. As a part of Mellon Financial Corporation ("Mellon") and as managers
of US client portfolios, Newton is also required to comply with a
number of US regulations which impact on personal account dealing ("PA
dealing") activities.
1.3. The main aim of the rules is to ensure that when employees of
investment management companies deal on their own accounts they do not
conflict with their employer's fiduciary responsibility to its
clients. In other words, clients' interests must always come first,
ahead of those of Newton staff.
1.4. It is impossible to lay down detailed rules to suit all situations and
members of staff will be expected to use their own common sense in
applying these rules. It is important that we comply with the spirit
as well as the letter of the regulations. If in doubt please contact
the Compliance department or the Dealing director.
B. General Application
2. Who do these rules apply to?
2.1. Newton Directors and Employees - The rules apply to all directors and
employees of Newton. This includes non-executive directors and
contractors/consultants working on-site for prolonged periods and any
other individuals who, through their involvement with Newton, are
likely to come into contact with the company's investment information.
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Please note that throughout these rules any references to PA deals
also include deals executed on behalf of Connected Persons.
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2.2. Connected Persons - The securities holdings and transactions of
"Connected Persons" also come within these rules. Connected Persons
are essentially close relatives and associates of the staff member.
The IMRO Rules give the following definition:
"anyone connected by reason of a domestic or business relationship
..... such that the officer or employee has influence over that
person's judgement as to how to invest his property or exercise any
rights attaching to his investments."
This definition would obviously include partners and minor children
but goes beyond this to include anyone that an employee could in some
way influence or control. This could include, for example, a trust of
which a member of staff is a trustee. If you are in any doubt as to
who falls within this definition you should contact the Compliance
department for clarification.
Please note that although it is necessary to report all dealings for
Connected Persons it may not be appropriate/permissible for their
deals to be executed through the in-house dealing facility. In this
case you should comply with the requirements of paragraph 17 in
respect of using external brokers.
2.3. Temporary Staff - Temporary staff are not entitled to use the in-house
dealing facility but must comply with paragraph 17 in respect of
dealings with external brokers.
3. Access Persons
3.1. Under US regulations we are required to maintain a register of those
members of staff who are classified as Access Persons for the purposes
of the US Investment Company Act of 1940. Access Persons are
essentially any individuals who are involved in making investment
decisions, or are aware of them being made, for US Investment
Companies (Mutual Funds), for example:
- Research analysts & fund managers - Dealers (Including the
Allocations team) - Trade Operations staff
- Directors and officers of Newton Capital Management Limited
3.2. If you are an Access Person you will be notified accordingly. At
present, the only additional obligation under these rules, for
individuals classified as Access Persons, is the requirement to
produce holdings reports in accordance with Section L of these rules.
4. What transactions do these rules cover?
4.1. The rules cover the purchase and sale of all investments on your own
account or the account of a Connected Person unless specifically
excluded.
4.2. Examples of investments covered by the rules:
- Shares (of any class, listed & unlisted) including shares in
Investment Trusts and the Newton Corporate Money Fund Limited.
- Bonds, debentures and UK government securities (i.e. gilts) -
Warrants - Futures, options & contracts for differences - Units in
unauthorised unit trusts - Securities listed above held through a PEP
or ISA.
This list is not exhaustive. If you have any queries, please contact
Compliance for clarification.
4.3. Investments to which the rules do not apply:
- Units in authorised unit trusts and shares in OEICs incorporated in
the UK - Life assurance policies
5. Derivatives
5.1. For the purposes of these rules derivatives include futures, options
and contracts for difference.
5.2. Mellon discourages employees from engaging in short-term or speculative
trading.
5.3. Newton does not have a facility for operating futures and options
accounts for staff members. Accordingly, if you wish to deal in these
securities you will need to establish your own dealing arrangements
with an external broker. Please ensure that you follow the requirements
of paragraph 17 below.
6. Investment Clubs
6.1. These rules cover situations where a staff member (or Connected
Person) is the beneficiary of a joint investment arrangement and is
involved in the investment decision making process in respect of that
arrangement e.g. Investment Clubs where a number of individuals pool
their cash and make collective investment decisions to deal in
investments (as defined in paragraph 4.2 of these rules).
6.2. Staff members involved in such arrangements should follow the
requirements of paragraph 17 of these rules.
7. Spread Betting
7.1. These rules cover situations where staff members (or Connected
Persons) are involved in spread betting arrangements (e.g. IG Index)
where the bet is based on investments (as defined in paragraph 4.2 of
these rules).
7.2. Staff members involved in such arrangements should follow the
requirements of paragraph 17 of these rules.
C. Dealing in Mellon Securities
8. Dealing Restrictions
8.1. Staff who deal in securities issued by Mellon Financial Corporation
("Mellon securities") should be aware of the sensitivities relating to
such transactions and need to avoid any suggestion of impropriety.
8.2. The following restrictions apply to all PA dealing activity (including
Connected Persons) in Mellon's publicly traded securities:
8.2.1. Short sales (i.e. the sale of a security which you do not own at the
time of the sale) of Mellon securities are prohibited.
8.2.2. Purchases of Mellon securities on margin are prohibited.
8.2.3. Option transactions involving Mellon securities are prohibited (NB:
separate arrangements exist for the sale of share options granted under
employee incentive schemes).
9. Knowledge of Major Mellon Events
9.1. Staff who have knowledge of major Mellon events are prohibited from
dealing in Mellon securities before the event is publicly announced.
This restriction applies even if you believe that the event does not
constitute price sensitive information.
10. Mellon Closed Period
10.1. Staff are prohibited from dealing in Mellon securities during a closed
period. Closed periods begin on the 16th day of the last month of each
calendar quarter and end three business days after Mellon publicly
announces the financial results for that quarter.
D. Newton Policy & Your Obligations
11. Newton Policy
Newton staff may deal on their own account provided that the following
principles are observed:
11.1. Client conflicts are always avoided regardless of any disadvantage that
may arise to the staff member.
11.2. Investment decisions are made prudently without excessive financial
outlay or exposure to unreasonable personal risk.
11.3. Personal account dealing must not interfere with your normal duties.
You should be aware that such transactions involve other staff, such as
the dealers and the trade operations section, in extra work and you
should be careful not to deal in such a way as to disrupt these people
in the performance of their duties. Client interests are paramount. In
circumstances where the processing of staff transactions may affect the
timely handling of client orders, staff deals will be deferred until
adequate resources are available.
12. Your Obligations
12.1. Read and understand these rules. Please pay particular attention to
paragraph 14.4, which sets out the requirements for avoiding overdrafts
on your Quasar account. If you are unclear about any aspect of the
rules you should contact Compliance for clarification.
12.2. Follow the procedures set out in these rules for arranging your PA
deals. Please remember that "PA deals" include deals for Connected
Persons.
12.3. Do not deal on insider information (see Compliance Manual module 3).
Dealing on inside information is a criminal offence which carries
severe penalties with a maximum of an unlimited fine and 7 years
imprisonment.
12.4. Ensure that to the best of your knowledge your decision to deal will
not conflict with the interests of any Newton clients. Dealing ahead of
known or expected client deals would be treated as a conflict of
interest. 12.5. Comply with the dealing restrictions set out in Section
G below.
12.6. Do not transact directly with clients who have portfolios under
discretionary management with Newton.
E. Establishing & Operating Your Personal Account
13. Dealing Methods
13.1. All staff are expected to deal in-house. There are 3 types of in-house
arrangements and these are described below.
13.2. In exceptional circumstances (e.g. investment in a product that Newton
does not offer) Compliance may grant permission to deal with an
external broker. Permission will not be granted on the grounds of a
cheaper service being available through an external broker. The rules
relating to external brokers are in paragraph 17 below.
13.3. A dealing charge (currently (pound)15) is levied on all in-house deals.
Staff should be aware that dealings in certain instruments and in
certain markets can entail more work and expense to the company. Newton
retains the right to levy a higher than the standard charge in these
circumstances to recoup these extra costs.
14. In House - Quasar Account
14.1. The in-house dealing facility is only available to members of staff and
their immediate families (i.e. spouses, including common law partners,
and dependent children). You may operate accounts in the name of these
family members but you are not permitted to operate more than one
account in your own name.
14.2. Before you can commence PA dealing you must first open a Quasar account
(Quasar is the computerised investment accounting system used by
Newton). The procedure for opening an account simply involves
contacting the Standing Data Supervisor (PIM Operations team,
Edinburgh) who will arrange for an account to be set up and will notify
you of your Quasar account number. You must quote your Quasar account
number on all PA Deal Slips.
14.3. Quasar account names should clearly identify the beneficial owner of
the account. You are not permitted to share Quasar accounts with other
individuals (staff or non staff).
14.4. Cash Management - As your Quasar account forms part of the Newton
general clients pooled account, it is imperative that your account does
not become overdrawn. You are responsible for ensuring that your
account remains in credit at all times. To minimise the risk of an
overdraft, the following requirements apply:
14.4.1. You must ensure that sufficient cash is always available to meet any
transaction obligations - remember to allow for the commission charge
and stamp duty. You should check that the transactions have been
carried out in accordance with your instructions.
14.4.2. Unless you are funding a purchase through the sale of another security
(see 14.4.3 below), sufficient cash must be in your account on the day
a purchase transaction is actually effected. You cannot wait until the
settlement date to provide funds.
14.4.3. If you are selling a holding to raise funds to pay for a purchase (or
to make a cash withdrawal) you must allow two clear business days after
the sale transaction is due to settle before the purchase transaction
settlement date (or withdrawing the cash). You are responsible for
checking that the sale proceeds have arrived into your account before
the purchase transaction/cash withdrawal is paid for/made. If funds
have not been received then you will be required to fund the shortfall
forthwith (or be prohibited from withdrawing the cash).
14.4.4. Special care should also be taken to ensure that adequate funds are
available, at least two clear business days, before payment is due, to
meet any cash obligations e.g. calls on part paid shares or warrants.
14.4.5. You are not able to offset shortfalls in one account with credit
balances in a related account (e.g. your spouses account).
Each account must be treated independently for the purposes of avoiding
overdrafts.
14.4.6. You are responsible for arranging the related FX transactions for deals
in a foreign currency. Please remember that short positions in a
foreign currency will impact on the net sterling balance in your
account as the exchange rate fluctuates. You are responsible for
ensuring that the net balance does not go into overdraft at any time.
14.5. Please note that with a Quasar account your assets will be held in safe
custody by the Bank of New York (Europe) along with those of Newton
clients.
15. In House - Execution Only
15.1. This arrangement exists for staff wishing to sell securities where they
already hold the share certificates (i.e. not held through Quasar).
15.2. Because of the extra work required to process these deals, and the
subsequent cost to the firm, the purchase of securities through this
arrangement is discouraged and will only be permitted in exceptional
circumstances.
15.3. When completing a PA Deal slip (see paragraph 18 below) you will need
to record the fact that you do not hold the security on Quasar.
Certificates and stock transfer forms must be passed to the Transitions
Manager on the day that the deal is effected. You will receive contract
notes and payment by cheque directly from the brokers.
15.4. Where permission has been given to register stock in your own name
outside of the Quasar system, you should provide details of your full
name and address in the appropriate section of the PA Deal slip.
16. In House - Discretionary Accounts
16.1. A staff member may become a discretionary portfolio management client
of Newton. In this case staff must sign a full client agreement and the
fee basis will be subject to negotiation. The portfolio will be managed
on a discretionary basis by a fund manager (other than the staff
member) and will rank equally with other discretionary clients.
16.2. The staff member should in no way seek to influence the fund manager as
regards specific investment decisions. Staff portfolios managed in this
way will not be subject to these PA dealing rules (other than Section
L).
17. External Broker
17.1. In order to utilise the services of an external broker staff must
comply with the conditions set out below.
17.1.1. You must obtain prior consent from Compliance to use the services of an
external broker.
17.1.2. You must inform the broker that you are an employee of Newton.
17.1.3. You must instruct the broker to forward a copy contract note in respect
of every deal directly to the Newton Compliance department forthwith
upon completion of the trade.
17.1.4. You are not permitted to accept from the broker any credit or special
dealing services without first receiving specific consent from the
Newton Compliance department.
17.1.5. For each transaction, before instructing the broker to deal, you must
complete the "External Broker Approval Form" which will enable the
Dealing director to check that your proposed deal will not conflict
with any known client deals.
F. Obtaining Approval to Deal
18. Completing a PA Deal Slip
18.1. Before the transaction can be arranged you will need to complete a PA
Deal slip (blue for purchase, pink for sale) which is available from
the Dealing Room in London. Please ensure that you give full details of
the stock that you intend to deal in. If a deal is done in the name of
a Connected Person, the name of the member of staff must also be stated
on the deal slip.
18.2. Staff members with portfolio management responsibilities for US
Investment Companies (Mutual Funds) will also be required to complete a
separate declaration form before the transaction can be arranged.
18.3. You are required to sign the declaration on the PA Deal slip for each
deal. You have a duty to report any potential conflicts with clients'
interests that you are aware of to the Dealing director at the time you
are seeking approval to deal. Specific examples of such conflicts
include:
Research personnel making a recommendation that could
reasonably be expected to result in a transaction for a client
portfolio in respect of the stock that they are seeking
approval to deal for their own account.
Fund managers who are contemplating dealing on behalf of
clients in a stock that they are seeking approval to deal in.
Other staff who may have become aware of any intention of
Newton to trade in a stock in which they seek approval to
deal.
18.4. This list is not exhaustive. If you are uncertain about the risk of
such a conflict of interest please obtain clarification from the
Dealing director or Compliance.
19. Obtaining Approval to Deal
19.1. The completed PA Deal slip must be forwarded to the Dealing director
who will ensure that, as far as he is aware:
19.1.1. There is no conflict of interest between the member of staff and any
client or between the company and a client.
19.1.2. There are no outstanding deals to be executed for a client in that
investment.
19.2. In the Dealing director's absence, approval can be obtained from his
appointed deputy. If neither is available you should contact the
Compliance department.
G. General Dealing Restrictions
20. 60-Day Trading Profit Prohibition
20.1. This restriction applies to all securities covered by these rules (as
defined in paragraph 4.2) with the exception of the following:
- UK Government Bonds (Gilts)
- Shares in Newton Corporate Money Fund Limited
20.2. You are prohibited from retaining a profit from:
- A purchase and subsequent sale of the same or an equivalent
security if the stock has been held for less than 60-calendar
days.
- A sale and subsequent purchase of the same or an equivalent
security if less than 60-calendar days has passed since the sale.
20.3. For this purpose, securities will be deemed equivalent if one is
convertible into the other or one entails a right to purchase or sell
the other; or if the value of one is expressly dependent on the value
of the other (e.g. derivative securities).
20.4. The 60-day rule does not prohibit dealing within that period but you
cannot benefit from any profit made on transactions where the purchase
or sale was within 60 days of the related sale or purchase. You can
close out a loss during that period in which case, as no profit has
been realised, no profit is forfeited.
20.5. Where a profit arises from a transaction during the 60-calendar day
period the Disgorgement Policy will be invoked in order to deal with
the prohibited profit (see Section H below for details).
21. Black Out Period
21.1. This rule only applies to staff members with portfolio management
responsibilities for US Investment Companies (Mutual Funds). You will
be formally notified if this rule applies to you.
21.2. You are prohibited from dealing in a security during the period of 7
days before and 7 days after a deal ("the Black Out Period") in the
same security has been executed for the US Mutual Fund for which you
have portfolio management responsibilities.
21.3. For example, if the fund purchases/sells the same security 5 days after
you sold your holding, you will be required to "give up" any profit
made (realised or unrealised) during the Black Out Period in addition
to any other appropriate sanctions. This will be calculated in
accordance with the Newton Disgorgement Policy (see Section H below for
details).
21.4. Certain securities are exempted from this prohibition if they qualify
under the de minimis exemption set out in paragraph 22 below. If you
are intending to use this exemption you must indicate this in the
appropriate section of the dealing slip.
22. De Minimis Exemption
22.1. A security would be exempt from the restrictions imposed under the
Black Out Period if they qualify under the criteria set out below.
o The PA transaction is less than(pound)15,000 in value, and
o The security is issued by a company which is a component of
either the FTSE 350 or the FT S&P World Index.
22.2. An up to date list of the companies which make up these indices is kept
in the Dealing Room.
H. Disgorgement Policy
23. What is disgorgement and why do we have it?
23.1. Disgorgement is the process whereby profits made on PA deals during
restricted periods are "given up" by the staff member. In some
instances this may include unrealised profits e.g. a PA purchase which
retroactively falls into a Black Out Period where the staff member
still holds the security.
23.2. In order to efficiently operate the 60-day trading profit prohibition
there needs to be a mechanism which allows staff to deal during these
periods (e.g. so that staff are not locked into loss making positions)
whilst maintaining the integrity of the dealing restriction.
24. How does it work?
24.1. Where you have made a profit from a PA deal during a restricted period
you are required to notify the Compliance Officer of this fact. The
Compliance department will be closely monitoring PA dealing activity to
test for adherence to this requirement.
24.2. The Compliance Officer is responsible for determining the formula for
calculating any profit on a deal and he will inform you of his
findings. Each case will be considered on its own merits but every
effort will be made to ensure that staff are not disadvantaged (other
than forgoing the profit) as a result of this policy.
24.3. If you are not satisfied with the method used to calculate the profit
figure you have a right of appeal to the Personnel Director whose
decision will be final.
24.4. The profit will be paid to a charity of your choice.
24.5. In exceptional circumstances where the offending transaction was
unavoidable, the Compliance Officer has discretion to waive the
requirement to disgorge profits e.g. you are required to sell your
holding under the terms of a takeover of the company.
I. Private Placements & IPOs
25. Definitions
25.1. Private Placement - for the purposes of these rules a Private Placement
is an issue that is offered to a limited number of investors as opposed
to being publicly offered. This definition is deliberately widely drawn
and ranges from a placing in large quoted company to an investment in a
small private concern e.g. a joint venture between yourself and a
friend or relative.
25.2. Initial Public Offering ("IPO") - for the purposes of these rules an
IPO is the first offering to the general public of equity securities in
a company. This definition is deliberately widely drawn and includes
all types of public offers and new issues.
26. The Approval Process
26.1. If you are planning to purchase securities through an IPO or a Private
Placement, you will need to apply to the Compliance Officer (using the
"IPO/Private Placement Request" form) for prior approval to participate
in the issue.
26.2. In some cases it may be necessary for the Compliance Officer to refer
the matter to the Investment Ethics Committee (see Section J below).
26.3. The Compliance Officer will review the request as soon as possible
(usually within 24 hours). However, you should allow at least three
clear business days between the date that you notify the Compliance
Officer and the date that you need to confirm your intention to
participate in the offering. This is to allow time for the matter to be
referred to the IEC if necessary.
26.4. You are not permitted to confirm your participation in the issue until
you have received the express approval of the Compliance Officer or the
IEC.
26.5. You are required to notify the Compliance Officer of your allotment
once this has been formally notified to you.
J. Investment Ethics Committee ("IEC")
27. Purpose of the IEC
27.1. The purpose of the IEC is to provide an independent review of any PA
dealing related transaction which may involve a conflict of interest
between a staff member and clients. Examples are listed below.
o PA dealing in IPO's and Private Placements where it is felt
that a potential conflict of interest exists e.g. there is a
possibility that Newton will invest in the company in the
future.
o Situations where a Contemporaneous Disclosure (see Section K)
has been made and the Compliance Officer is concerned that a
conflict of interest may have arisen.
o Other PA dealing related situations where there is a potential
risk of criticism of the actions of a fund manager so an
independent review would be advantageous.
28. Operation of the IEC
28.1. The IEC will meet as required to review situations which require an
independent assessment.
28.2. The IEC will report directly to the Executive Committee who will also
operate as an appeal body, should this be necessary.
28.3. The quorum for an IEC meeting will be three. The meeting will be
chaired by the Compliance representative, the second representative
will have investment experience and the third representative will be
from an independent business area.
28.4. Meetings will be minuted and the findings of the committee will be
reported to the staff member within one business day of the meeting.
K. Contemporaneous Disclosure
29. Purpose of this Requirement
29.1. This rule only applies to staff with portfolio management
responsibilities.
29.2. The purpose of this requirement is to ensure that any potential
conflicts of interest between staff and their clients are clearly
disclosed so that they can be assessed and dealt with appropriately.
29.3. This requirement differs from other rules in this area in that the
disclosure obligation applies at the time of dealing for clients rather
than at the time of the PA deal.
30. How does it work?
30.1. Staff with portfolio management responsibilities must complete a
"Notice of Personal Account Holding" form prior to making or acting
upon a portfolio recommendation in a security which they own
personally.
30.2. The form includes a self-authorisation sign off whereby you will be
required to confirm that your decision to deal for a client has not
been influenced by the fact that you have a personal interest in the
security.
30.3. The form should be completed prior to the first such portfolio
transaction in the security in each calendar month. For subsequent
transactions in that security in the same month, it is not necessary to
complete another form.
30.4. The completed form should be sent to the Compliance Officer forthwith.
Once this process has been completed you will then be free to deal in
the security for your clients.
30.5. The Compliance Officer may refer the matter to the Investment Ethics
Committee for further review.
31. De Minimis Exemption
31.1. A PA holding would be exempt from this disclosure requirement if it
qualifies under the criteria set out below.
o The PA holding is less than(pound)30,000 in value
((pound)50,000 aggregate where Connected Persons also have a
holding), and
o The security is issued by a company which is a component of
either the FTSE 350 or the FT S&P World Index. An up to date
list of the companies which make up these indices is kept in
the Dealing Room.
L. Holdings & Transaction Reports
32. The Requirement
32.1. The US regulations require that Access Persons (see paragraph 3 above)
must submit three types of report to the firm concerning their PA
holdings.
32.2. This requirement is additional to the transaction based approval
process set out in these rules.
33. What is Covered by this Requirement
33.1. All holdings and transactions in securities defined in paragraph 4.2 of
these rules.
33.2. For the purposes of this section, portfolios which are managed under
discretion by a third party, in which you (or a Connected Person) have
a beneficial interest, should be included in the reporting process.
34. Initial Holdings Report
34.1. Within 10 days of joining the firm (or changing roles within the
company that brings them into the Access Persons category), Access
Persons are required to produce a report listing all personal holdings
(Connected Persons included where relevant) in securities covered by
these rules (see paragraph 4.2 above).
34.2. Individuals who are caught by this requirement will be notified of
their obligations together with instructions for completing the report.
35. Quarterly Transaction Report
35.1. Within 10 days of the calendar quarter end, Access Persons are required
to provide details of all PA transactions (including those of Connected
Persons where relevant) during the period.
35.2. Where details of PA transactions have already been provided to
Compliance through another process (e.g. dealing through Quasar or an
External Broker in compliance with these rules) it is not necessary for
Access Persons to provide this report. However, if you have acquired or
disposed of securities covered by these rules through some other method
(e.g. you have been gifted shares or received them in a will
settlement) this will need to be reported in a quarterly report.
35.3. Any transactions carried out in respect of portfolios which are managed
under discretion by a third party, in which you (or a Connected Person)
have a beneficial interest, should be included in this report. An
exception to this would be if they have been already been reported to
Compliance (e.g. copy contract notes at the time the transaction was
effected).
36. Annual Holdings Report
36.1. Within 30 days of the calendar year end, Access Persons are required to
provide details of all PA holdings, including those of Connected
Persons where relevant (current as of year end).
36.2. The report will be split into four sections: securities held on Quasar,
securities held through a broker, securities held through a
discretionary management arrangement and securities which you hold in
your own name.
36.3. In some cases it will be sufficient to just identify the arrangements
and confirm that all transactions during the period had been reported
in accordance with the PA Dealing rules.
36.4. You will also be required to confirm that you have complied with the PA
dealing rules at all times during the year.
M. Monitoring Compliance with these Rules
37. Internal Monitoring
37.1. Under the IMRO Rules, US regulations and our obligations to the Board
of Directors of the US Mutual Funds that we manage, we are required to
actively monitor PA dealing activity.
37.2. The Compliance department will regularly monitor this area to test
adherence to these rules.
38. UK Regulators
38.1. IMRO/FSA always take a close interest in PA dealing activity during
their monitoring visits. They will review the adequacy of the
monitoring that we have performed as a company and will carry out their
own tests to assess compliance with the IMRO rules. They always treat
breaches of the rules as serious matters.
38.2. The London Stock Exchange has a Market Surveillance department which
conducts its own monitoring of the market in order to identify
instances of insider dealing. Where they identify suspicious
transactions they will investigate those trades and often this will
involve interviews with the individuals involved.
39. US Regulators
39.1. The Newton group has a US registered entity (Newton Capital Management
Limited) which is regulated by the US Securities Exchange Commission
("SEC"). The SEC enforces compliance with the relevant US Securities
legislation and has the power to sanction UK based firms and
individuals. PA dealing activity is an area that they have
traditionally taken a very close interest in.
39.2. As a part of the Mellon group, Newton is subject to regulation by the
US Federal Reserve Bank. The "Fed" conducts regular visits to Mellon's
overseas subsidiaries and compliance with PA dealing rules is an area
that they will closely examine.
40. Clients
40.1. Under the US Investment Company Act of 1940 the Board of Directors for
each of our US Mutual Fund clients is required to receive annual
reports from the fund manager (Newton) on the firm's compliance with
these PA dealing rules.
